Dec 17, 2024 Global
It was a banner year for exchange traded products as investors navigated a busy calendar: monetary policy changes, a record number of global elections, sector rotations, and double-digit returns spurred record inflows across asset classes and exposures. To recap 2024's ETP & ETF market trends, we've identified 10 key themes that defined the year.
U.S. ETPs hit a new milestone in 2024: the industry gathered $1 trillion in new assets this year, topping the previous record of $903 billion in 2021. The flows peaked in November, with ETPs adding a record $155 billion for the month and averaged $7.3 billion daily. Post U.S. election, equity flows led the way, doubling October’s take, while fixed income ETFs held their own, racking up 34 consecutive months of inflows.
Figure 1. Annual ETP/ETF flows
Source: BlackRock, Bloomberg, Markit. As of December 9, 2024
Chart description: Bar graph of annual ETP inflows spanning from 2004 to 2024.
In the first week following the U.S. election, investors piled into risk across asset classes. An early and uncontested outcome unleased animal spirits after weeks of de-risking into the event by both the institutional and retail trading communities. The S&P 500 posted its biggest five-day rally in a year, while ETPs posted their largest week of inflows on record:
The year was a balancing act between historically attractive yields and demanding valuations – and investors turned to active management to navigate that. Active fixed income ETFs added over $100 billion in assets during the year. While active fixed income funds are relatively new additions to the ETF universe, they’ve captured outsized allocations. In 2023, active fixed income ETFs made up only 17% of total fixed income flows; in 2024, that share expanded to 36%.
For investors looking to take a more active approach to fixed income exposures, the iShares Flexible Income Active ETF (BINC) seeks to offer access to sectors of the fixed income market that can be challenging to reach. Experienced, active management within fixed income can complement equities by offering diversified, potentially higher yielding assets that can help provide a ballast to sidestep a different subset of volatility and downside risks in the equity markets.
Investors reached for additional risk in 2024 as equity benchmarks largely posted double-digit gains — the S&P 500 cleared over 50 all-time highs while the Nasdaq, Nikkei, and other global analogs also registered new records in broad-based returns.2 The positive performance translated to a resurgence of adoption for volatile exposures, with high-octane offerings seeing a pickup in flows. Leveraged, inverse, and single-stock ETFs captured their highest allocations since 2022, accounting for 13% of total ETF trading of the year.3
The theme for international investing in 2024 was “selectivity” as investors globally flocked to single country allocations over broad international funds. Flows into single country ETFs, or funds with an aim of providing exposure to a single country, were remarkably strong. Over the course of the year, investors added $185 billion in net assets to the space, nearly double 2023’s total.
Read more from our spotlight on Japan and insight on India.
Figure 2: Single country ETF/ETP inflows
Source: BlackRock, Bloomberg, Markit. As of December 9, 2024.
Chart description: Line graph comparing single country cumulative flows of 2023 and 2024.
After raising rates for 16 months, then being on pause for 14 more, September saw the start of the Federal Reserve’s easing cycle, with the FOMC delivering a 0.5% cut. Flows into enhanced income ETFs accelerated on the back of the bigger-than-expected cut, with BuyWrite ETFs adding $2.2 billion in September as investors sought to preserve high income in the face of lower cash rates. Income focused fixed income funds also netted flows, with iShares Flexible Income Active ETF (BINC) seeing positive inflows every month of the year.
China faced a challenging backdrop in 2024, struggling to jumpstart its economy amid a worsening real estate crisis. A surprising shift in tone came in September, followed by a slow rollout of monetary and fiscal policy measures to underwrite the government’s growth targets. Investors quickly turned to ETFs to gain exposure to the policy shift: China single-country ETFs gained $13.6 billion in assets the following month, completely reversing year-to-date outflows. However, some of the reach for China exposure was short-lived, with a steady string of outflows thereafter as investors reevaluated their holdings. Emerging markets ex-China exposures remained popular allocations. The exposure posted positive inflows on the year as investors stripped China out of broad benchmarks — EMXC, iShares MSCI Emerging Markets ex China ETF added an average of $600 million in inflows each month of the year.
Investors faced a volatile interest rate backdrop in 2024 as fluctuating economic data shifted Fed Fund rate expectations.4 The changing shape of the yield curve also contributed to shifting investors’ duration preferences. Intermediate-term Treasuries gathered the most flows across durations, up $35 billion year-to-date. Investors initially stayed away from short-term allocations at the start of the year, but the exposure saw a resurgence as the expected rate cutting cycle was further pared back. Despite relative underperformance, long-term fixed income gathered $28 billion inflows in 2024.
The first half of the year largely mirrored 2023’s performance, with tech and tech-adjacent names leading index gains. Growth outperformed value by nearly 20% over that period, buoyed by its overweight exposure to the tech sector, and ETF flows emphasized investor sentiment: growth ETFs netted six times the inflows of their value counterparts in the first half of the year.5 Notably, that preference unwound in the third quarter. Utilities, real estate, industrials, and financials all posted double-digit gains in Q3, and investors dialed up value allocations, ending six consecutive quarters of higher growth inflows.6 Notably, the shifting leadership spurred inflows into active solutions — investors utilized nimble exposures to help time their factor rotations, like the iShares U.S. Equity Factor Rotation Active ETF (DYNF).7
Learn more about factor investing.
Figure 3: Value trumps growth in Q3 ETFs flows
Source: BlackRock, Bloomberg, Markit. ETF groupings determined by Markit. As of December 6, 2024.
Chart descriptions: Bar chart comparing value and growth ETF inflows from 2021 to 2024 on a quarterly basis.
Bitcoin, among other cryptocurrencies, was one of 2024’s strongest-performing asset classes. The price of Bitcoin gained over 135% in 2024 and crossed the $100,000 milestone for the first time amid bullishness in the space after the U.S. election.8 Spot Bitcoin ETPs have added a standout $54 billion of inflows, the bulk of which into the iShares Bitcoin Trust ETF (IBIT) with $33 billion of inflows. IBIT also reached $50 billion assets under management in 2024, making it the most successful ETP launch of all time.9
Learn more about investing in Bitcoin ETPs with iShares and learn more about getting exposure to Bitcoin and the benefits of using an exchange-traded product like IBIT.
All flow data sourced from BlackRock, Bloomberg, Markit, unless otherwise noted. ETF groupings determined by Markit. As of 12/6/2024.
The iShares Bitcoin Trust ETF is not an investment company registered under the Investment Company Act of 1940, and therefore is not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940. The Trust is not a commodity pool for purposes of the Commodity Exchange Act. Before making an investment decision, you should carefully consider the risk factors and other information included in the prospectus.
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1 Source: Bloomberg. Biggest five-day rally in reference to 11/6 – 11/11.
2 Source: Bloomberg. Benchmarks in reference to multiple global indices – Nikkei 225, FTSE 100, TSX Composite. As of December 6, 2024.
3 Source: Bloomberg, flow data compiled by Bloomberg. As of 12/6/2024.
4 Source: Bloomberg, as determined by Fed Funds Futures. As of 12/6/2024.
5 Source: Bloomberg. Growth represented by S&P 500 Growth Index; value represented by S&P 500 Value Index. As of 12/6/2024. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.
6 Source: Sectors as represented by Global Industry Classification Standard (GICS). As of 12/6/2024.
7 Source: Nimble active solutions as determined by active equity ETFs. As of 12/6/2024.
8 Source: Bloomberg, as of 12/5/2024. Bitcoin represented by the BLOOMBERG BITCOIN SPOT PRICE.
9 Source: Bloomberg, as defined by fastest ETP to reach $50 billion in AUM. As of 12/6/2024.
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This information must be accompanied or preceded by a current iShares Bitcoin Trust ETF prospectus, which may be obtained by clicking here. Please read the prospectus carefully before investing.
The iShares Bitcoin Trust ETF is not an investment company registered under the Investment Company Act of 1940, and therefore is not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940. The Trust is not a commodity pool for purposes of the Commodity Exchange Act. Before making an investment decision, you should carefully consider the risk factors and other information included in the prospectus.
Investing in digital assets involves significant risks due to their extreme price volatility and the potential for loss, theft, or compromise of private keys. The value of the shares is closely tied to acceptance, industry developments, and governance changes, making them susceptible to market sentiment. Digital assets represent a new and rapidly evolving industry, and the value of the Shares depends on their acceptance. Changes in the governance of a digital asset network may not receive sufficient support from users and miners, which may negatively affect that digital asset network’s ability to grow and respond to challenges Investing in the Trust comes with risks that could impact the Trust's share value, including large-scale sales by major investors, security threats like breaches and hacking, negative sentiment among speculators, and competition from central bank digital currencies and financial initiatives using blockchain technology. A disruption of the internet or a digital asset network would affect the ability to transfer digital assets and, consequently, would impact their value. There can be no assurance that security procedures designed to protect the Trust’s assets will actually work as designed or prove to be successful in safeguarding the Trust’s assets against all possible sources of theft, loss or damage.
A BuyWrite Strategy ETF’s use of options may reduce returns or increase volatility. During periods of very low or negative interest rates, the Underlying Fund may be unable to maintain positive returns. Very low or negative interest rates may magnify interest rate risk. In a falling interest rate environment, the ETF may underperform the Underlying Fund. By writing covered call options in return for the receipt of premiums, the ETF will give up the opportunity to benefit from increases in the value of the Underlying Fund but will continue to bear the risk of declines in the value of the Underlying Fund. The premiums received from the options may not be sufficient to offset any losses sustained from the volatility of the Underlying Fund over time. The ETF will be subject to capital gain taxes, ordinary income tax and other tax considerations due to its writing covered call options strategy.
Small-capitalization companies may be less stable and more susceptible to adverse developments, and their securities may be more volatile and less liquid than larger capitalization companies.
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